Exhibit 92
Use the Information Below for the Following Problem(S)
Consider

question 24

Multiple Choice

Exhibit 9.2
Use the Information Below for the Following Problem(S)
Consider the three stocks, stock X, stock Y and stock Z, that have the following factor loadings (or factor betas) .
$$\begin{array} { c c c } \text { Stack } & \text { Factor 1 Londine } & \text { Factor } 2 \text { Londing } \\\hline X & - [ .55 & 1.2 \\Y & - [ .10 & 0.85 \\Z & 0.35 & 0.5\end{array}$$
The zero-beta return (??) = 3%, and the risk premia are ?? = 10%, ?? = 8%. Assume that all three stocks are currently priced at $50.
-Refer to Exhibit 9.2.If you know that the actual prices one year from now are stock X $55,stock Y $52,and stock Z $57,then

• A) stock X is undervalued, stock Y is undervalued, stock Z is undervalued.
• B) stock X is undervalued, stock Y is overvalued, stock Z is overvalued.
• C) stock X is overvalued, stock Y is undervalued, stock Z is undervalued.
• D) stock X is undervalued, stock Y is overvalued, stock Z is undervalued.
• E) stock X is overvalued, stock Y is overvalued, stock Z is undervalued.

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Definitions:

Status Variables

Characteristics of subjects that can affect the outcome of a study and are not manipulated but can be observed and measured.

Causal Inferences

Conclusions about cause-and-effect relationships, often deduced from the manipulation of variables in experimental designs.

Internal Validity

The extent to which the results of a study can be attributed to the variables under investigation rather than to other extraneous factors.

Quantitative Designs

Research strategies that focus on numerical data, statistical analysis, and the objective quantification of variables.